Globalization has introduced additional partners into the supply chain, thus creating new challenges of distant vendors and wide variances in the sophistication of systems. At the same time, the ever-increasing cost pressures are forcing companies to do a better job of managing expensive inventories. Under the macro-trend of operating logistics worldwide, there are some specific problems, as addressed below, which give rise to a need for an integrated global shipment system that may avoid distribution center delays and provide enhanced visibility in the movement of goods.
First of all, the current process for international shipments involves numerous entities including carriers, brokers, warehousemen and local cartage firms. As various components of goods are sourced throughout various regions and buyers are scattered around the globe, supply chains are far stretched and growing extremely complex, thus extremely complicating the efforts to provide accurate and timely data to customers. Such “piecemeal” logistics invites a number of problems, such as lack of visibility, absence of cost transparency, security concerns and unreliable service. As opposed to the prior “piecemeal” approach, therefore, a need exists for an “integrated” logistics solution from a single source that allows one specialist to synchronize the end-to-end supply-chain efforts and ensure the supply chain runs in a uniform, seamless fashion.
Another problem is the delays and high costs associated with distribution centers. Distribution centers have traditionally been considered an essential component of a consumer goods supply chain, and the reliance on distribution centers has increased in recent years as companies have moved their manufacturing facilities to overseas locations. In a traditional supply chain, distribution centers serve as warehouses where companies store large inventories of consumer goods as a safety stock cushion. Distribution centers are preferably, but not always, centrally located in a geographic region to allow the company to distribute the goods on an as-needed basis to a plurality of retail outlets disposed throughout the region. Depending on the size of the region and the immediacy of a retailer's need for a good, a company can have one or many distribution centers spread across a given geographic region. But distribution centers are expensive to operate. In addition to the cost of owning or leasing the space required to store goods, companies that rely on distribution centers invest substantial amounts of money on inventoried goods that just sit in one or more warehouses.
In an effort to lower the expense associated with operating multiple distribution centers, some companies have moved toward the nationwide distribution center model. But the single distribution center approach has its drawbacks, one of which is the inefficiencies in the transport process. For example, a company that uses a nationwide distribution center for its U.S. retailers may receive a shipment of internationally manufactured goods on the west coast. Once the goods clear customs, the goods are placed on a transportation vehicle and transported across country to the nationwide distribution center. At the distribution center, the goods are labeled with store-ready labels and with package shipment labels and the packages are picked up by a carrier such as the United Parcel Service (UPS). If the importing company is, in fact, a national chain, at least some of the imported goods are likely destined for retail outlets on the west coast. In many cases, companies will incur the time and expense to transport recently-imported goods to a distribution center, and then immediately turn-around and pay a package carrier to ship the packages back to a retail outlet on the west cost. Given the dynamic retail market, a distribution center bypass model shortens product delivery cycle and keeps inventories in motion. A recognized need therefore exists in the industry for a supply chain system that bypasses the need for distribution centers.
In addition, the need to keep track of products and information, from procurement through delivery to customers, has never been greater. Therefore, there is a trend among logistics service providers such as UPS to offer detailed status information on shipments in transit. For example, UPS customers can go to the UPS.com website and use package tracking numbers to track the status of their items in shipment. As a result, advance notification of incoming shipments can be provided to the intended recipients. However, current business trends drive the need for even heightened visibility. It relates not just to tracking shipments on the ground, water, rail or in the air, but also to how much inventory is on hand in a warehouse, where it is stored, and when it has been allocated to fulfill an order—in other words, all the activities involved in moving goods from maker to seller to buyer. This type of insight is especially desirable in the global supply chain where a company needs to respond quickly to unforeseen circumstances, cut costs and speed delivery.